company culture vs. compensation

Which Matters More Today: Company Culture or Compensation?

kununu

There’s a lot of hype going around the job market today around a single topic: workplace culture. But when you really take a dive into the topic of workplace culture vs. compensation, which is really most important to American workers?

While we’d love to give you a definitive winner of these two, the answer is that it really varies.

Because if you spent time digging through all of the studies and resources surrounding this exact debate, the truth is that both culture and compensation are nearly equally important. For instance, our own data from hundreds of thousands of kununu reviews shows that satisfaction for both factors increase at a similar rate between companies that are rated poorly vs. highest rated companies:

  • Among highest rated companies on kununu (4 stars or higher), the average ratings for “company culture” and “overall compensation for your work”, respectively, are: 4.54 and 4.00 stars
  • Among lowest rated companies on kununu (2 stars or less), the average ratings for “company culture” and “overall compensation for your work”, respectively, are: 1.30 and 1.25 stars

But if company culture and compensation are such distinct factors, why isn’t there a clear winner? Simple – because compensation is one aspect of the job that directly contributes to positive or negative culture. This means that despite their beliefs, no employer has an option to choose culture over compensation or vice versa; the two are far too intimately connected to be definitively separated.

What we know about engagement is changing

High-performing workers are more likely to be recruited by competing company today than ever before. Their qualifications and experience are easy to identify and finding a way to connect with them instantly is nearly effortless with the ease of social and job networks. While it may have been true that engaged employees were less likely to pursue other opportunities even five years ago, recruiters will work to sway them before they ever even consider looking elsewhere. And what most employers don’t know is that even the most engage employees are still open to discussion, even if only out of curiosity.

Cultivating a culture that fosters engagement is critical, but it’s not enough to prevent top performers from considering the opportunities that land on their doorstep, especially if the other company’s compensation package is more competitive. To truly retain the best, companies need to give their workers a reason to stay – in the form of unmatched culture and compensation that matches their value in the organization and industry.

Money is directly tied to well-being

Engagement is all about well-being – work-life balance (is there such a thing?), health and wellness programs, philanthropy, challenge, autonomy – but did you know that research conducted by Princeton University shows a direct correlation between income and emotional well-being? To be more specific, until an employee reaches $75k annually in earnings, their emotional well-being rises in direct correlation with their salary. Once they reach $75k, their well-being levels off despite future raises. This is concrete evidence that compensation and culture can’t be separate despite our efforts and further proof that compensation is in fact, one component of culture.

Today’s workforce is motivated by opportunity

One thing we know for sure is that today’s workforce is less loyal than ever before, which means companies need to be on their toes in order to retain our best. Lack of loyalty usually isn’t personal; it’s simply the presentation of a desire to grow, advance, contribute, and be challenged in one’s career. Millennials especially are looking for a leg up – a better opportunity, better pay, better benefits, or even a better office – and if companies can’t demonstrate how they can provide these things, younger workers will chase their dreams alongside someone who can. While baby boomers might call this a flaw in this generation, there’s huge benefit to it – this drive and unwillingness to settle is a great boon to many businesses.

Key takeaways

  • Studies show that culture is directly responsible for retention and turnover rates across the board
  • The importance of culture should never overshadow the importance of compensation, which is one aspect of culture and not a separate motivator

 

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